Quiznos was founded in 1981 and it did pretty well as a higher end sandwich shop. More variety, more meat, more upscale than its main competitior at the time, Subway.
So what happened?
- Some economists look to the recession and rising unemployment rates. Many Quiznos stores are located at office plazas and business districts and less jobs and less money to spend means less sandwiches sold.
- Other economists look to growing competiton such as Panera who offers what some may argue is higher quality food at the same price point. Subway also did a nice job of emphasizing its quality with a campaign concentrated on the fresh value while keeping its prices lower than Quiznos.
- Another undeniable problem for Quiznos has been franchisee relations. Franchisees have complained of a disconnect between management and day to day operations.
Quiznos attempted to reorganize itself into a profitable enterprise outside of bankruptcy back in 2012 when it eliminated about $300 million in debt and gave majority ownership to billionaire Marc Lasry's Avenue Capital Group LLC through a $150 million infusion and debt-to-equity swap.
Quiznos will continue to operate during the Chapter 11 reorganization. Quiznos reports debt upward of $500 million and proposes a reorganization plan that would slash the debt by $400 million. Quiznos is also seeking a $15 million loan to help implement new policies that it believes will revive the company. Policies such as cutting food costs for franchisees, making loans availabe to franchisees for improvements and advertising, and utilizing technolocy in all aspects. CEO of Quiznos, Stuart A. Mathis, believes that by improving the quality of its products and renewing its brand, it will come out on top.
In my opinion, franchisee relations is the largest problem for Quiznos to overcome. In it's hayday, Quiznos operated more than 4,000 stores and now the number of stores has fallen to about 2,100. All but seven of those stores are operated but franchisees. The CEO claims that it will reduce the cost of distribtution for franchisees, make small loans available for development and provide incentives. I hope that is enough.
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